Tax Deducted at Source (TDS) is a means of tax collected at the very source of income. Any company or person making a payment is required to deduct tax at the rates prescribed by the act within a specified period. A deductor is a person responsible for deducting tax. The person who receives the payment after the deduction of tax is called the deductee. TDS on sale of property means the buyer of the property is required to deduct TDS before making payment to the Seller at the rate prescribed in the act.
Sec 194IA TDS on Sale of Property
As per Section 194IA of Income Tax Act ”TDS on Sale of Property”, a buyer of the property is required to deduct tax at the rate of 1% of the Sale Consideration only if the Sale consideration is equal to or more than Rs.50 lakhs. If the sale consideration is less than Rs.50 lakhs then no TDS is required to be deducted. Any transferee (buyer) is responsible for paying to a resident transferor (seller) any sum in the name of sale consideration for the transfer of immovable property is required to deduct TDS at the time of credit of such amount or at the time of payment whichever is earlier. If the sale consideration is paid in installments then TDS is to be deducted at the end of each installment.
The term “Consideration of immovable property” in “TDS on Sale of Property” is defined by the union budget 2019 which includes maintenance fee, water facility & electricity fees, Membership fee, car parking fee or any advance amount which are incidental to the transfer of such immovable property.
Example: Mr.X bought an apartment for Rs.60 lakhs. Then TDS is to be deducted at 1% of Rs.60 lakhs i.e. Rs60000.
The buyer needs to get TAN (Tax Deduction Account Number) as per section 203A for making payment of TDS instead he can make payment using PAN. For making the payment e must also obtain the seller’s PAN otherwise, TDS will be deducted at the rate of 20%.
For the purpose of this section, “Immovable Property” means any land other than Agricultural land or building or any part of the building.
Agricultural land means agricultural lands in India, It is situated within the jurisdiction of Municipality or Cantonment Board which has a population of not less than 10,000, or It is situated in any area within below given distance measured aerially. The land shall not be treated as Agriculture Land, if:
|Population of the Municipality||Distance from Municipal limit or Cantonment Board|
|More than 10,000 but does not exceed 1,00,000||Within 2 km|
|More than 1,00,000 but does not exceed 10,00,000||Within 6 km|
|Exceeding 10,00,000||Within 8 km|
How to Pay TDS through Challan 26QB and to Obtain Form 16B
The TDS on Sale Immovable Property has to be paid in Form 26QB within 30days from the end of the month in which the TDS is deducted. The buyer is required to furnish the TDS certificate in Form 16B to the seller after depositing the TDS to the government.
The following are the steps to pay the TDS through Form 26QB and to obtain the form 16B which is to be issued to the seller.
- Payment of TDS through Challan 26QB
- Go to the TDS website
- Click “TDS on Sale of Property” and from the drop-down list select “Online form for furnishing TDS on property (Form 26QB)”
- Select the challan as “TDS on Sale of Property”.
- The following details should be filled such as PAN of the seller, Contact details of seller and buyer, details of the property, Sale amount paid/credited and the details of tax deposited.
- Click on “Submit” button. After confirming the details, two options will be available on the page such as “Print Form 26Qb” and “Submit to the bank”.
- An acknowledgment will also be displayed which may be saved for future use.
- Click on “Print Form 26QB” to take print and then click on “Submit to the Bank” to make the required payment through net banking facility.
- After making the successful payment a challan counterfoil will be displayed containing CIN, payment details and bank name through which e-payment has been made. This counterfoil is proof of payment being made.
- Steps to download Form 16B
- After making the payment, Login to the TRACES website using your PAN number.
- Under “Download” option select “Form 16 for Buyer”.
- Enter the details pertaining to the property transaction for which Form 16B is to be requested. Enter the Assessment Year, Acknowledgment Number, PAN of Seller and click on “Proceed“.
- Click on “Submit request button” on the confirmation page.
- A success message on submission of download requests will appear. Please note the request number to search for the download request.
- Click on “Requested Downloads” to download the requested files.
- Search for the request with a request number. Select the request row and click on “HTTP downloads” button to download Form 16B.
Notice for Taxpayer for Non-Filing of Form 26QB
An Annual Information Return (AIR) is obtained by the Income Tax Department from the registrar/sub-registrar office regularly. From this report, the IT department can figure out the property sale transaction exceeding Rs.50 lakhs. So if a buyer does not deduct TDS at 1% or if he does not file the TDS return and deposit it to the government within the specified time then a notice will send to the buyer by the income tax department.
Penalties for non-filing of Form 26QB
- Interest for Non-Deduction of TDS – 1% per month or part of the month from the date on which TDS is to be deducted to the date of actual payment.
- Interest for Non-Remittance of Deducted TDS – 1.5% per month or part of the month from the date of deduction to the date on which the payment is made.
Late Filing Fees
- Late filing of Form 26QB – After interest, a late filing fee of Rs.200 per pay until when the default continues. The late fee should not exceed the TDS amount.
- IF default continues for more than one year then an additional penalty of Rs.10000 to Rs.100000 is to pay under Section 271H.
The Form 26QB challan has to be filled by each buyer for every unique buyer-seller combination for their respective share. So if there are 2 buyers and 2 sellers’ four separate forms have to be filled. A seller of the property can claim the TDS deducted on an immovable property at the time of filing their income tax return. In a case where a refund arises due to TDS on sale of a property, the refund can be claimed through an ITR filing.